By ADRIAN SAINZ, DAVID TWIDDY, DANIEL WAGNER, ALEX VEIGA, Associated Press Writers Adrian Sainz, David Twiddy, Daniel Wagner, Alex Veiga, Associated Press Writers – Sat Aug 1, 10:39 am ET
It was — note the past tense — the worst housing recession anyone but survivors of the Great Depression can remember.
From the frenzied peak of the real estate boom in 2005-2006 to the recession’s trough earlier this year, home resales fell 38 percent and sales of new homes tumbled 76 percent. Construction of homes and apartments skidded 79 percent. And for the first time in more than four decades of record keeping, home prices posted consecutive annual declines.
A staggering $4 trillion in home equity was wiped out, and millions of Americans lost their homes through foreclosure.
Now take a deep breath and exhale. The worst is over.
By every measure, except foreclosures, the housing market has stabilized and many areas are recovering, according to a spate of data released in the past two weeks. Nationwide, home resales in June are up 9 percent from January, on a seasonally adjusted basis. Sales of new homes have climbed 17 percent during the same period. And construction, while still anemic, has risen almost 20 percent since the beginning of the year.
Even home prices, down one third from the top, edged up in May, the first monthly increase since June 2006.
“The freefall is over,” says Dean Baker of the Center for Economic and Policy Research.
The problem is that, Baker, like many economists, expects the housing market will “be bouncing around the bottom” for the second half of the year.
There are also real threats that could poison this budding recovery. The unemployment rate, which is 9.5 percent, is expected to surpass 10 percent, leaving even more homeowners unable to pay their mortgages. Mortgage rates could rise, making homeownership less affordable. And the federal tax credit for first-time homebuyers, which has lured many into the market, is set to expire on Nov. 30.
“As long as jobs are being lost, regardless of all the federal programs out there to help the borrowers, you’re still going to have problems in the housing market,” says Steve Cumbie, executive director of the Center for Real Estate Development at the University of North Carolina’s Kenan-Flagler Business School.
True, but when you’ve got bidding wars for foreclosures in places like Las Vegas, Phoenix and Los Angeles, it’s time to call the bottom.
• West
For years Las Vegas symbolized the boom, as mile after mile of desert gave way to three-bedroom homes and swimming pools. Then came the crash and it symbolized something else: a decade of speculation and excess.
Now, Las Vegas is one of the hottest housing markets in the region again. This city has always profited from others’ misfortune, and the same can be said of the current housing market.
In Clark County, Nev., home to Sin City, one in every 11 homes had received at least one foreclosure-related notice in June, according to RealtyTrac. The glut of deeply discounted foreclosures has almost doubled sales activity for most of this year.
“In January the market was busy, and since that time, it’s gone a little haywire,” says Brad Snyder, an agent with ZipRealty in Las Vegas. “There’s (sales) activity now that we haven’t seen even since ‘04.”
The situation is similar in California’s Riverside, San Joaquin and San Bernardino counties, where one out of every 14 homes was in foreclosure.
After falling 18 percent in the second half of 2008, monthly home prices were flat in the first half of this year, on a seasonally adjusted basis, according to the National Association of Realtors.
Markets like these have seen a surge this year in all-cash buyers, many of them investors, scooping up the sharply discounted properties. It’s not uncommon to see multiple offers on a single property, and that’s helped slow the rate of price declines a little. The demand also has helped whittle down the inventory of homes for sale to the lowest level since the boom.
“We have seen such a steep decline in supply right now, that when a home comes on the market it’s first day there could be seven or eight or 10 people there in a matter of hours,” Snyder says.
To lure buyers away from foreclosures, homebuilders have slashed prices or are simply tearing down vacant homes. New home sales jumped almost 59 percent in the first half of the year, while construction in these grossly overbuilt markets slid 12 percent.
In the Pacific Northwest and states such as Utah, by contrast, housing markets are on a different timer than the rest of the West. Home sales and values held up better and longer while markets in the Southwest were already in decline. These markets also haven’t seen as many foreclosures wreaking havoc with home prices.
States in the region: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming
Data compares June vs. January and June 2008:
Home resales: down 1 percent, up 12 percent
Median price: $214,800, flat, down 25 percent
New home sales: up 59 percent, down 10 percent
New home construction: down 12 percent, down 42 percent
Mortgage delinquencies as of March: 12 percent
Regional outlook: The recession remains the region’s wild card. Unemployment is at 10.2 percent in the West, but that could go higher if the economy worsens. If that happens, expect more foreclosures and a slower turnaround.